US Home Affordability Calculator

The classic 28/36 rule says housing should not exceed 28% of gross income, total debt 36%. A household with $120,000 income ($10,000/month) qualifies for around $2,800/month housing payment, which at 7% interest and 20% down translates to roughly a $400,000 home. The exact number depends on property tax (varies wildly by state), insurance (huge variation Florida vs Wyoming), and HOA if any.

Lenders' debt-to-income ratio (DTI) caps tend to be 43-50% for conventional, FHA up to 56.9%. But qualifying for the maximum is rarely advisable - it leaves no margin for car repairs, medical bills, or job changes. House-poor is the term for stretching to the max; financial planners generally advise staying well under the lender's cap.

20% down avoids PMI and gives you immediate equity. 10% down means roughly $200/month PMI on a $400k home for several years until equity reaches 20%. 5% down means PMI for longer plus a higher monthly payment. FHA loans accept 3.5% down with permanent MIP (no removal except via refinance) for credit scores 580+.

Veterans (VA loans) and rural buyers (USDA loans) can qualify for 0% down with no PMI. First-time buyer programs in many states offer down payment assistance grants of $5,000-15,000. The minimum down to make the loan work is rarely the optimal down - figure your full closing costs ($8-20k on $400k) plus reserves (3-6 months of new payments) on top.

Property tax: 0.3-2.5% of home value per year, varies by state. Insurance: $1,500-4,500/year (Florida and California can run $4-8k+). Maintenance budget: 1-3% of home value per year as a rule of thumb (a $400k home needs $4-12k/year for upkeep over time). HOA fees: $0-1,500/month in condos, often $200-400 in HOA neighborhoods.

Utilities, lawn care, snow removal, pest control all add to monthly carrying cost. A $2,500/month mortgage payment often translates to a $3,500-4,500/month true housing cost once everything is included. Build all of this into the affordability calculation, not just principal and interest.

Lenders increasingly want to see 2-6 months of housing payment in reserves after closing. Self-employed buyers should expect to need 6-12 months. Job tenure of 2+ years in the same field is the standard - recent career changes or job-hopping can trigger lender scrutiny.

From a financial planner perspective, the right reserves number is more like 6-12 months of total expenses, separate from down payment. Hitting that buffer plus 20% down on a home you can comfortably afford under the 28% rule is the comfortable buying position. Use the [US Mortgage Calculator](/us-mortgage-calculator) to model the monthly and the [US Closing Costs Calculator](/us-closing-costs-calculator) for cash needed at close.